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Guidance Issued on Application of Windsor to Retirement Plans

Administrators of qualified retirement plans must recognize
the same-sex spouses of legally married participants as of
June 26, 2013, under guidance issued by the IRS but will not
be required to amend their plans to retroactively recognize
participants’ legal same-sex marriages before that date (Notice 2014-19).

The Supreme
Court, in Windsor, 133 S. Ct. 2675 (U.S.
2013), held that Section 3 of the Defense of Marriage Act
(DOMA), P.L. 104-199, is unconstitutional, and in August 2013
the IRS announced that same-sex couples who are legally
married in jurisdictions that recognize their marriages will
thus be treated as married for federal tax purposes,
regardless of whether the jurisdiction they live in recognizes
same-sex marriages (Rev. Rul. 2013-17).

In Notice
2014-19, which is organized as a series of questions and
answers, the IRS says that as a result of the Windsor
decision, “any retirement plan qualification rule that applies
because a participant is married must be applied with respect
to a participant who is married to an individual of the same
sex.” For example, if a plan is subject to Sec. 401(a)(11), a
plan participant in a same-sex marriage cannot waive a
qualified joint and survivor annuity without obtaining his or
her spouse’s consent.

The notice says that plans must
treat same-sex marriages as valid as of June 26, 2013, the
date of the Windsor decision, and will not be treated
as failing to meet the requirements of Sec. 401(a) merely
because they did not recognize the same-sex spouses of
participants before that date. Between June 26 and Sept. 16,
2013 (the date of Rev. Rul. 2013-17), plans are allowed to
recognize only same-sex marriages of participants who are
domiciled in a state that recognizes same-sex marriage.
Starting Sept. 16, 2013, they must recognize valid same-sex
marriages regardless of whether the participant’s state of
domicile recognizes the marriage.

Under the notice,
qualified plans can be amended to reflect the outcome of
Windsor for dates prior to June 26, 2013; however, the
IRS warns that this may trigger requirements, such as the
ownership attribution rules, that are hard to implement
retroactively. There may also be other unintended
consequences. If a plan is amended to retroactively reflect
Windsor, it must specify the date as of which it will
reflect Windsor.

The IRS will allow plans to
be amended retroactively for specific purposes if they do not
affect the plan’s qualified status. For example, a plan
sponsor may amend the plan to reflect Windsor only with
respect to the Sec. 401(a)(11) qualified joint and survivor
annuity and qualified preretirement annuity requirements.

Some plans will have to be amended to reflect
Windsor, depending on the terms of the plan. For
example, any plan that defines a marital relationship by
reference to Section 3 of DOMA or has terms that are otherwise
inconsistent with Windsor or Rev. Rul. 2013-17 will
have to be amended. Plan amendments must be made by the later
of the plan’s otherwise applicable deadline under Rev. Proc.
2007-44, Section 5.05, or Dec. 31, 2014.

The winners of The Tax Adviser’s 2016 Best Article Award are Edward Schnee, CPA, Ph.D., and W. Eugene Seago, J.D., Ph.D., for their article, “Taxation of Worthless and Abandoned Partnership Interests.”

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